ServiceNow Reports Financial Results for Second Quarter 2015

SANTA CLARA, Calif.--(BUSINESS WIRE)--ServiceNow® (NYSE:NOW), the enterprise cloud company, today announced
the financial results for its second quarter 2015.

Second Quarter 2015 Results:

Revenues of $246.7 million, an increase of 48% year-over-year and 59%
in constant currency.

GAAP net loss of $61.9 million, or a loss of $0.40 per basic and
diluted share, compared to a GAAP net loss of $50.4 million, or a loss
of $0.35 per basic and diluted share, in the second quarter of 2014.

Non-GAAP net income of $7.3 million, or income of $0.05 per basic
share and $0.04 per diluted share, compared to a non-GAAP net loss of
$9.4 million, or a loss of $0.07 per basic and diluted share, in the
second quarter of 2014.

For a reconciliation of these GAAP and non-GAAP financial measures,
please see the table entitled "Results of Operations GAAP to Non-GAAP
Reconciliation” included at the end of this release.

“We had a strong second quarter on the heels of our Knowledge15
conference, with significant growth in our emerging product areas,” said
Frank Slootman, president and chief executive officer, ServiceNow. “We
also saw a 68% year-over-year increase in the total number of customers
with annualized contract values in excess of $1 million, demonstrating
that customers continue to expand their use of ServiceNow.”

The financial guidance discussed below is on a non-GAAP basis, except
for revenues, and excludes stock-based compensation expense,
amortization of purchased intangibles, and acquisition related expenses.
Please see the tables included at the end of this release for a
reconciliation of these non-GAAP financial measures to the related GAAP
financial measures. Negative numbers are shown in parentheses. For the
third quarter of 2015, we expect:

Total revenues between $252 and $257 million, representing
year-over-year growth between 41% and 44%, and between 49% and 52% in
constant currency. Our total third quarter revenue estimate consists
of subscription revenues between $216 and $220 million and
professional services and other revenues between $36 and $37 million.

Billings between $280 and $285 million, representing year-over-year
growth between 35% and 37%, and between 42% and 45% in constant
currency.

Subscription gross margin of approximately 80%, professional services
and other gross margin of approximately 14%, and overall gross margin
of approximately 71%.

Operating margin of approximately 8%.

Free cash flow of approximately $35 million.

For the full year 2015, we expect:

Total revenues to be in the range of $985 million to $1 billion,
representing year-over-year growth between 44% and 47%, and between
52% and 55% in constant currency. Our total annual revenue estimate
consists of subscription revenues between $830 and $840 million and
professional services and other revenues between $155 and $160 million.

Billings of approximately $1.2 billion, representing year-over-year
growth of approximately 41%, and approximately 49% in constant
currency.

Updates Since Our Last Earnings Release:

We hosted our Knowledge15
conference with nearly 9,000 registrations from a variety of service
domains across the enterprise. At the show we introduced CreatorCon,
our inaugural ServiceNow developer conference with nearly 1,500
professional developers registered and we hosted CIO
Decisions15, an exclusive, invitation-only summit for CIOs.

We launched the CreateNow
Developer Program, devoted to the recruitment, education and
growth of customer and partner developers who are creating their own
enterprise applications and integrations on the ServiceNow platform.

We opened the ServiceNow
Store to provide partners with an enterprise application
marketplace to sell and market their cloud-native enterprise business
applications developed on the ServiceNow platform.

We released the results of a new report, “Today’s
State of Work: The Productivity Drain,” revealing that managers in
corporate environments spend nearly two days a week on unnecessary
day-to-day administrative tasks that are not core to their jobs.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on
Wednesday, July 29, 2015. Interested parties may listen to the call by
dialing 877.280.4953 (passcode: 66561394), or if outside North America,
by dialing 857.244.7310 (passcode: 66561394). Individuals may access the
live teleconference from the investor relations section of the
ServiceNow website at http://investors.servicenow.com.

An audio replay of the conference call and webcast will be available
three hours after its completion and will be accessible for 30 days. To
hear the replay, interested parties may go to the investor relations
section of the ServiceNow website or dial 888.286.8010 (passcode:
86323623), or if outside North America, by dialing 617.801.6888
(passcode: 86323623).

Statement regarding use of non-GAAP financial measures

We report non-GAAP financial measures in addition to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP.

Our financial measures under GAAP include foreign currency impact,
stock-based compensation expense, the amortization of debt discount and
issuance costs related to the convertible senior notes, amortization of
purchased intangibles and acquisition-related expenses, and the related
income tax effect of these adjustments. We believe the presentation of
operating results that exclude these items provides useful supplemental
information to investors and facilitates the analysis of our core
operating results and comparison of operating results across reporting
periods. We also believe that this supplemental non-GAAP information is
therefore useful to investors in analyzing and assessing our past and
future operating performance.

Free cash flow, which is a non-GAAP financial measure, is calculated as
GAAP net cash provided by operating activities reduced by purchases of
property and equipment. We believe information regarding free cash flow
provides investors with an important perspective on the cash available
to invest in our business and fund ongoing operations. However, our
calculation of free cash flow may not be comparable to similar measures
used by other companies.

Billings is calculated as revenue plus the change in total deferred
revenue as presented on the statement of cash flows. We believe billings
offers investors useful supplemental information regarding the
performance of our business, and will help investors better understand
the sales volumes and performance of our business.

We present constant currency information to provide a framework for
assessing how our underlying business performed excluding the effect of
foreign currency rate fluctuations. To present this information, current
period results for entities reporting in currencies other than U.S.
Dollars are converted into U.S. Dollars at the exchange rates in effect
during the prior period presented, rather than the actual exchange rates
in effect during the current period.

The company encourages investors to carefully consider its results under
GAAP, as well as its supplemental non-GAAP information and the
reconciliation between these presentations, to more fully understand its
business. Please see the tables included at the end of this release for
the reconciliation of GAAP and non-GAAP results.

Use of forward-looking statements

This release contains “forward-looking statements” regarding our
performance, including in the section entitled “Financial Outlook.”
Forward-looking statements are subject to known and unknown risks and
uncertainties and are based on potentially inaccurate assumptions that
could cause actual results to differ materially from those expected or
implied by the forward-looking statements. If any such risks or
uncertainties materialize or if any of the assumptions prove incorrect,
our results could differ materially from the results expressed or
implied by the forward-looking statements we make.

Among the important factors that could cause actual results to differ
materially from those in any forward-looking statements are: (i) errors,
interruptions, delays, or security breaches in or of our service or web
hosting, (ii) our ability to grow at our expected rate of growth,
including our ability to convert deferred revenue and backlog into
revenue, add and retain customers, sell additional subscriptions to
existing customers and enter new geographies and markets, (iii) our
ability to continue to release, and gain customer acceptance of,
improved versions of our services, (iv) our ability to develop and gain
customer acceptance of new products and services, including our
platform, and (v) our ability to compete successfully against existing
and new competitors.

Further information on these and other factors that could affect our
financial results are included in our Form 10-K for the year ended
December 31, 2014 and in other filings we make with the Securities and
Exchange Commission from time to time, including our Form 10-Q that will
be filed for the quarter ended June 30, 2015.

We undertake no obligation, and do not intend, to update these
forward-looking statements, to review or confirm analysts’ expectations,
or to provide interim reports or updates on the progress of the current
financial quarter.

About ServiceNow

ServiceNow is changing the way people work. With a service-orientation
toward the activities, tasks and processes that make up day-to-day work
life, we help the modern enterprise operate faster and be more scalable
than ever before. Customers use our service model to define, structure
and automate the flow of work, removing dependencies on email and
spreadsheets to transform the delivery and management of services for
the enterprise. ServiceNow enables service management for
every department in the enterprise including IT, human resources,
facilities, field service and more. We deliver a ‘lights-out,
light-speed’ experience through our enterprise cloud – built to manage
everything as a service. To find out how, visit www.servicenow.com.

ServiceNow, Knowledge and the ServiceNow logo are registered trademarks
of ServiceNow. All other brand and product names are trademarks or
registered trademarks of their respective holders.

ServiceNow, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Revenues:

Subscription

$

200,461

$

132,724

$

380,368

$

250,099

Professional services and other

46,255

34,033

78,312

55,748

Total revenues

246,716

166,757

458,680

305,847

Cost of revenues (1):

Subscription

45,392

33,243

87,836

64,432

Professional services and other

34,325

25,695

68,780

47,620

Total cost of revenues

79,717

58,938

156,616

112,052

Gross profit

166,999

107,819

302,064

193,795

Operating expenses (1):

Sales and marketing

136,574

91,937

246,631

161,353

Research and development

53,276

35,439

103,124

66,549

General and administrative

30,384

24,914

59,776

46,545

Total operating expenses

220,234

152,290

409,531

274,447

Loss from operations

(53,235

)

(44,471

)

(107,467

)

(80,652

)

Interest and other expense, net

(7,186

)

(5,231

)

(10,060

)

(11,194

)

Loss before provision for income taxes

(60,421

)

(49,702

)

(117,527

)

(91,846

)

Provision for income taxes

1,504

661

2,491

1,828

Net loss

$

(61,925

)

$

(50,363

)

$

(120,018

)

$

(93,674

)

Net loss per share - Basic and Diluted

$

(0.40

)

$

(0.35

)

$

(0.78

)

$

(0.65

)

Weighted-average shares used to compute net loss per share - Basic
and Diluted

154,465,367

144,456,675

153,041,433

143,267,181

(1) Includes total stock-based compensation expense for
stock-based awards as follows:

Non-GAAP weighted-average shares used to compute net income per
share - diluted

168,079,343

144,456,675

167,317,235

143,267,181

(1)

Constant currency growth rates presented are derived from
converting the current period results for entities reporting in
currencies other than U.S. Dollars into U.S. Dollars at the
exchange rates in effect during the prior period presented rather
than the actual exchange rates in effect during the current period.

(2)

The Non-GAAP amounts presented for the three and six months ended
June 30, 2014 have been revised to exclude the amortization of
purchased intangibles, acquisition and other related costs and
their related tax effects associated with an acquisition completed
in 2013.

ServiceNow, Inc.

Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on
information available as of June 30, 2015. The company’s future
performance and financial results are subject to risks and
uncertainties, and actual results could differ materially from the
guidance set forth below. Some of the factors that could affect the
company’s financial results are stated above in this press release.
More information on potential factors that could affect the
company’s financial results is included from time to time in the
company’s public reports filed with the SEC, including the company's
Annual Report on Form 10-K filed on February 27, 2015 and the
company's Form 10-Q for the quarter ended June 30, 2015 to be filed
with the SEC. The company assumes no obligation to update any
forward-looking statements or information, which speak as of their
respective dates.

Three Months Ended

Three Months Ended

Growth rates

Constant currency

growth rates (1)

September 30, 2015

September 30, 2014

Non-GAAP billings

$280 - $285 million

$208 million

35% - 37%

42% - 45%

Change in deferred revenue from Consolidated Statements of Cash Flows

28 million

29 million

GAAP revenue

$252 - $257 million

$179 million

41% - 44%

49% - 52%

Non-GAAP subscription gross margin

80%

Stock-based compensation expense

(2%)

Amortization of acquired intangible assets

(1%)

GAAP subscription gross margin

77%

Non-GAAP professional services and other gross margin

14%

Stock-based compensation expense

(2%)

GAAP professional services and other gross margin

12%

Non-GAAP total gross margin

71%

Stock-based compensation expense

(6%)

GAAP total gross margin

65%

Non-GAAP operating margin

8%

Stock-based compensation expense

(27%)

Amortization of acquired intangible assets

(1%)

GAAP operating margin

(20%)

Non-GAAP free cash flows

$35 million

Purchases of property and equipment

25 million

GAAP net cash provided by operating activities

$60 million

Twelve Months Ended

Twelve Months Ended

Growth rates

Constant currency

growth rates (1)

December 31, 2015

December 31, 2014

Non-GAAP billings

$1,200 million

$851 million

41%

49%

Change in deferred revenue from cash flow

200 - 215 million

168 million

GAAP revenue

$985 - $1,000 million

$683 million

44% - 47%

52% - 55%

(1)

Constant currency growth rates presented are derived from
converting the current period results for entities reporting in
currencies other than U.S. Dollars into U.S. Dollars at the
exchange rates in effect during the prior period presented rather
than the actual exchange rates in effect during the current period.